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The Ethiopian experience on micro insurance

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The Ethiopian experience on micro insurance

The Ethiopian experience on micro insurance

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  • 1. Conference on New Directions for Smallholder Agriculture Nahu-Senaye Araya, CEO, Nyala Insurances The Ethiopian Experience On Micro Insurance Session 5, Breakout Session 11
  • 2.
    • PRESENTATION HEADINGS:
    • I. PROFILE: Country & Financial
    • Institutions
    • II. NYALA’S EXPERIENCE
    • A. MPCI
    • B. WICI
    • III. LEASON LEARNT
    • IV. RECOMMENDATION
    • V. CONTACTS
    We Care We Protect
  • 3.
    • PROFILE
    • A1. COUNTRY PROFILE
    • Population: 85 mln. (UN 2010) – 83% Rural
    • Area: 1.13 mln. Sq. kms.
    • Life Expectancy: 56 years (Male) 59 years (Female)
    • GNP per capita: US $ 330 (WB 2009)
    • Main Export: Coffee, Hides, Oil Seeds, Flower
    • Main Food Crops: Wheat, Barley, Maize, Teff
    • Gov. Dev. Agents on Food Crops: 67,000
    •  
    We Care We Protect
  • 4.
    • A2. PROFILE FINANCIAL INSTITUTIONS & NYALA’S
    • No. of Commercial Banks: 14 (3 Gov’t. 11 PVT.).
    • No. of Micro Finance: 30
    • No. of Insurance Companies: 12 (1 Gov’t + 11 Pvt)
    • Only one in Micro Insurance: Nyala
    • Nyala Insurance:
    • - Small sized company
    • - Turnover: About US 10.0ml.
    • - Manpower: 270
    • - Activities: General, life and Micro Insurance
    • (Crop, Livestock, Life)
    We Care We Protect
  • 5. II. NYALA’S EXPERIENCE DELIVERY CHANNEL We Care We Protect PAYMENT STATEMENT POLICY HOLDER CERTIFICATE HOLDER CLAIMANT
  • 6. We Care We Protect B. NYALA’S EXPERIENCE: 2007 TO DATE:- B1. Multiperil Crop Insurance (MPCI) – Crop Yield, Flood, etc Year Region No. Household Crop Type Total Ha Ave. Sum insured ‘ 000s‘Birr Premium ‘ 000s Birr Rate % Claim ‘ 000s Birr Ratio % Technical Support 2007 Oromia 120 Wheat, Teff, HB 246.16 2.05 664 31, 4.71 Nil - Nyala Covers + Swiss Re 2008 Oromia“ 827 Wheat, Teff, HB 777.83 0.94 3,076, 145 4.71 91 63.1 “ 2009 Oromia“ 676 Wheat, Teff, CP 317.42 0.47 3,372, 179 5.31 No - “ Tot ------ 1,623 1,341.41 0.83 7,113 355 5.0 91 25.74
  • 7. B2 . WEATHER INDEX CROP INSURANCE (WICI) – COVERS DROUGHT ONLY) We Care We Protect Year Region No. Household Crop Total Ha Average HA/HH Sum insured’000s Birr Premium ‘000s Birr Rate % Claim “ 000s Birr Ratio % Support 2009 Oromia 137 Haricot Bean 159.75 1.17 639 73 11.50 309 420.6 WFP Tigrai 200 Teff 21.0 0.11 115 28 23.90 Nil Nil OXFAM A. 2010 Tigray 1,309 Teff, Wheat/ 147.05 0.11 974 357 36.64 Nil Nil OXFAM A. Oromia 290 Barely, Maize 208.00 0.72 418 83 19.96 Nil Nil IFPRI Amhara 32 Sorghum, & 12.75 0.40 26 3 10.20 Nil Nil IFPRI SNNPR 452 Teff 199.18 0.44 396 73 18.57 Nil Nil IFPRI Total 2,420 447.7 0.31 2,567 617 20.13 309 50.10 -
  • 8. We Care We Protect B3. COMBINED MPCI & WICI- 2007 TO 2010 Household Total HA Average HA/HH Sum Insured “ 000s Birr Premium ‘000S Birr Rate % Claim ‘ 000S Birr Ratio % Support 4,043 2,089.14 0.52 9,680 973 6.38 401 41.2 WFP, OXFAM & IFPRI
  • 9.
    • B3. Associates: Financial & Technical Assistance (Past & Future)
    • National:
    • Commercial Banks (Dashen Bank)
    • Association of Micro Finance
    • Micro Finance
    • National Metrology Authority
    • Ministry of Agriculture
    • Co-ops & Unions
    •   International:
    • IFPRI, FAO, OXFAM AMERICA, ILO, WB, SWISS-RE
  • 10.
    • LESSONS LEARNT
    • A1. FARMERS’ SIDE
    • Farmers with no expectation show great interest
    • - Minimize the mental & physical pressure coming from Creditors
    • - Use of Insurance policy as collateral improves their bankability
    • - Improve their negotiating power with Creditors
    • Cooperatives/Union willing & capable to act as policy holders on their members behalf.
  • 11.
    • Draw Backs
    • - Lack of awareness
    • - Affordability of premium
    • - Questions insurers’ motive
    • Insurance products so far introduced not fully meet their needs ( Livestock/Health/Life ? )
    Cont.
  • 12.
    • A2. INSURERS’ SIDE
    • Lack adequate/reliable data to ensure quantity product design/costing
    • Costing not actuarian derived
    • - Unknown risks entail high premium
    • - Major & reliable re-insurers show little or no interest
    • Have low human & infrastructure capacity
    • - Inadequate field visits
    • - Minimal training to own staff & farmers/union officials/Gov’t Dev. Agents
  • 13.
    • A3. GOVERNMENT SIDE
    • No. Regulation for Micro Insurance yet
    • MI & MF activities not integrated in the food security strategy
    • Created uneven competitive ground for financial players.
    • - MF income tax exempted
    • - MF’s credit collection more or less enforcable by government
    • Development Agents not being used as financial educators of farmers
  • 14.
    • D. DONOR'S Side
    • Spend too much time and money on pre studies/research
    • Obssesed with paper work
    • Give less emphasis on human & infrastructure capacity building
    • Promote short term year- to- year programe.
    • Need to revisit capability & acceptabilty of their staff
  • 15.
    • IV. RECOMMENDATION ( Ethiopian context )
    • TO BE ENHANCED AND OR INTRODUCED BY THE MAJOR PLAYERS)
  • 16.
    • A1. ALL MAJOR PLAYERS (Government, Insurers, Donors, and Banks)
    • STEP UP CUSTOMER’S EDUCATION AND TRAINING
    • MAKE THE LIVELYHOOD OF THE FARMER THE FOCAL POINT FOR ALL MI AND MF PROGRAMES
    • HELP THE FARMER FROM THE MENTAL AND PHYSICAL PRESSURE COMING FROM THE MF AND INPUT SUPLIERS.
    • FORCED TO PAY HIGH INTEREST RATE
    • (OVER 2.5 TIMES COMMERCIAL RATE)
    • FORCED TO JOIN THE “G5 LOAN GUARANTEE” SYSTEM
  • 17.
    • A2. GOVERNMENT:
    • INTRODUCE LEGAL FRAMEWORK FOR MICRO INSURANCE
    • LEGALIZE COMMERCIAL BANKS AND INSURERS TO INCLUDE MI AND MF BUSINESS IN THEIR PORTFOLIO
    • CREAT LEVEL GROUND FOR ALL PLAYERS TO AVTIVELY INVOLVE IN MI AND MF AREA.
    • USE GOV’T DEVELOPMENT AGENTS AS FIELD FINANCIAL TRAINERS AS WELL
    • INCORPORATE MI AND MF ACTIVITIES IN THE FOOD SECURITY STRATEGY
  • 18.
    • A3. INTERNATIONAL DONORS:
    • MINIMIZE THE TIME AND MONEY SPENT ON PRE STUDY/RESEARCH.
    • CONSIDER A 3 TO 5 YEAR PROGRM (NOT YEAR 2 YEAR) WITH DIMINISHING SUBSIDY AMONT TO FARMERS OVER THE PERIOD
    • GIVE PRIORITY TO THE DEVELOPMENT OF STAFF OF INSURES/UNIONS/MF.
    • REVISIT THE CAPABILITY/ACCEPTABILITY OF OWN STAFF/CONSULTANTS.
  • 19.
    • A4. COMMERCIAL INSURERS:
    • ALWAYS WORK WITH RELIABLE RE-INSURANCE
    • USE CO OPS/UNIONS AS DELIVERY CHANNELS AND OR AGENTS
    • MAKE THE MI POLICY SIMPLE AND UNDERSTANDABLE.
    • SETTLE OR REPUDIATE CLAIMS AS SOON AS POSSIBLE
    • INCLUDE MI AND MF ACTIVITIES IN THEIR BUSINESS AND INTRODUCE A MINUMUM %AGE OF MI AND MF BUSINESS IN THEIR PORTFOLIO
    • INTRODUCE ALWAYS HIGH QUALITY PRODUCT DESIGN AND RISK RELATED PREMUIUM
  • 20.
    • A5. COMMERCIAL BANKS AND CREDITORS:
    • ACCEPT POLICY FROM REPUTABLE INSURER AS LOAN COLLATERAL
    • TAKE THE BUSINESS AS SOCIAL CONTRIBUTION AND OR IMAGE BUILDING IN THE SHORT TERM WITH THE VIEW OF ITS LONG TERM BUSINESS POTENTIAL AND PROFITABILITY.
  • 21.
    • CONTACTS:
    • FOR INFORMATIONAND OR ASSISTANCE ON MICRO INSURANCE IN ETHIOPIA
    • MR. EYOB MEHERETTE
    • CEO, NYALA INSURANCE S.C.
    • EMAIL: [email_address] [email_address]
    • TEL: + 251 911 20 73 91
    • FAX: + 251 116 62 67 06
  • 22.
    • FOR COMMENTS/QUERRIES ON WHAT HAS BEEN PRESENTED HERE
    • NAHU-SENAYE ARAYA
    • ADVISOR/CONSULTANT
    • EMAIL: [email_address]
    • TEL: +251 911 20 73 89
    • FAX + 251 116 62 67 06
  • 23.
    • PLEASE CONTINUE HELPING THE
    • POOR FARMERS
    • THANK YOU